Retail Landlords Should Find Flexibility in 2011

CHICAGO-Retail landlords and tenants should find more common ground this year, with landlords breathing easier, according to a recent report by Jones Lang LaSalle. The company’s fourth quarter projections show the national retail vacancy down to 7.2%, though rental rates are still down, and may not bottom until 2012.

Geno Coradini, managing director of corporate retail solutions with JLL, tells GlobeSt.com that as the economy improves, the needs of both landlord and tenant will narrow. “In 2009 retailers were being forceful with landlords to reduce occupancy costs, backed up by threats of relocation or closing, but a lot of that has simmered down. Today, retailers are being more reasonable with financial troubles, and landlords are being more receptive.”

However, tenants still know that vacancy abounds in the national market, and it’s still possible to find flexibility in lease contracts. Those tenants that signed up short-term during the downturn now have to evaluate whether to stay put or it’s cheaper to pull up and move, he says. “There are some tenants, such as a bank with a ground lease, where it only makes sense to stay, but others, such as in-line tenants, may have more flexibility,” Coradini says.

Development will not improve for at least the first half of the year, Coradini says, as there’s already enough vacant space for new tenants to occupy. This year may also include a significant addition of vacant space as stores facing technology obsolescence, such as Blockbuster, Borders and Barnes & Noble, all consider a future with fewer locations. However, the decade of “add 300 stores, then close 300 stores” will not likely be repeated soon, he says. “I think by 2012 it will still be a tenant-favorable market, and we’ll see more strategic growth by retailers, who are better able to position themselves in the market.”